FinancingCreative_financingMEDIUM
A buyer purchases a property 'subject to' the seller's existing FHA loan. The seller's lender has a due-on-sale clause in the mortgage. What is the PRIMARY risk to the buyer in this arrangement?
Correct Answer
C) The lender may call the entire loan balance due immediately upon discovering the transfer
When a property is transferred 'subject to' an existing loan with a due-on-sale clause, the lender may exercise that clause and demand immediate full repayment of the loan balance.
Answer Options
A
The buyer will have to pay a higher interest rate than marketB
The seller retains legal title to the propertyC
The lender may call the entire loan balance due immediately upon discovering the transferD
The buyer must obtain private mortgage insuranceWhy This Is the Correct Answer
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Why the Other Options Are Wrong
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Deep Analysis of This Financing Question
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Background Knowledge for Financing
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Real World Application in Financing
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Key Terms:
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